Technical Paper
THE GLOBAL COMPETITIVENESS OF
THE KENYAN FLOWER INDUSTRY
Prepared for the Fifth Video Conference on
the Global Competitiveness of the Flower Industry in Eastern Africa
December 2011
For:
World Bank Group
Kenya Flower Council
Author: Milco Rikken
www.proverde.nl
Contents
1 Introduction ................................................................................................................... 3 2 Development of the global flower industry ................................................................. 3 2.1 Development of the global flower industry .................................................................................................. 3 2.2 Leading flower exporting countries: the big five ......................................................................................... 4 2.2.1 Kenya.................................................................................................................................................. 5 2.2.2 Netherlands ........................................................................................................................................ 5 2.2.3 Colombia............................................................................................................................................. 7 2.2.4 Ecuador .............................................................................................................................................. 8 2.2.5 Ethiopia ............................................................................................................................................... 9 2.3 Other countries ........................................................................................................................................... 9 3 Policies and incentives towards floriculture............................................................. 12 3.1 Role of government policies ..................................................................................................................... 12 3.2 Policy and policy guidelines in the leading flower exporting countries ..................................................... 13 3.2.1 Kenya................................................................................................................................................ 13 3.2.2 Netherlands ...................................................................................................................................... 14 3.2.3 Colombia........................................................................................................................................... 16 3.2.4 Ecuador ............................................................................................................................................ 17 3.2.5 Ethiopia ............................................................................................................................................. 18 4 Driving forces for horticultural development............................................................ 19 4.1 Impact of external forces .......................................................................................................................... 19 4.1.1 The currency triangle: euro - dollar - national currency .................................................................... 19 4.1.2 Climate.............................................................................................................................................. 20 4.1.3 Oil prices ........................................................................................................................................... 20 4.2 Internal factors driving development ......................................................................................................... 20 4.2.1 Government policies ......................................................................................................................... 20 4.2.2 Sector cooperation ........................................................................................................................... 21 4.2.3 Research and development.............................................................................................................. 21 5 Review SWOT of the Kenyan flower industry ........................................................... 21 5.1 External factors ......................................................................................................................................... 22 5.2 Internal factors .......................................................................................................................................... 22 6 Projections and recommendations ............................................................................ 24 6.1 Projections ................................................................................................................................................ 24 6.2 Key challenges and recommendations ..................................................................................................... 24 References ....................................................................................................................... 28 Appendix 1 Dutch agricultural knowledge system .................................................... 29 The Global Competitiveness of The Kenya Flower Industry
Milco Rikken (ProVerde  www.proverde.nl)
2
1 Introduction
The World Bank, using funding received from the All ACP Agricultural Commodities Program
(AAACP), has organised, in cooperation with the Kenya Flower Council (KFC), a series of video
conference-based seminars (VCs) on topics pertaining to competitiveness in the floriculture industry.
The World Bank series will be integrated, albeit independently organised, into a larger CDE funded
activity of the KFC on issues pertaining to regional competitiveness. The 5th seminar, held on the 29th
of November 2011, covered the issue of global competitiveness of floriculture production in the East
Africa Region. Participating countries in the VC were Ethiopia, Kenya, Tanzania and Uganda.
The objective of this paper is to offer an analysis of the competitiveness of the Kenyan flower industry
and by extension the East African producer’s compared to other global producers and exporters.
Given the lead position of Kenya in the regional East African industry, it has been deemed appropriate
that the focus be on developments in Kenya. We therefore intend the paper to give insight into the
main issues around competitiveness in order to provide a contextual and experiential learning point for
the other countries involved in the videoconference.
The paper is organised as follows:
 Section 1 introduces the background and objectives of the paper.
 Section 2 provides a summary of the developments in the global flower industry over the last 10 to
15 years, targeting the EU market. Experiences from leading exporting countries are highlighted.
 Section 3 offers a bird’s eye view of the policy and policy guidelines that are operational in the
major flower growing countries.
 In Section 4, driving forces for horticultural development are identified. Incentives which really
promoted the development of industries in the leading exporting countries are brought to light.
 In Section 5, existing SWOT analyses of the Kenyan flower industry are reviewed, taking into
account results of the preceding videoconferences and lessons learnt in other leading countries.
 Finally, Section 6 provides recommendations to strengthen the position of the Kenya flower
industry for further growth in the next 10 years.
2 Development of the global flower industry
2.1
Development of the global flower industry
The present day flower industry is a dynamic and highly international industry. Significant growth rates
have been achieved during the past few decades. Trade is dominated by south-north flows with
Europe and North-America housing the world’s largest consumer markets, while the producing
countries are situated close to the equator. For the past ten years, the leading flower exporting
countries have been the Netherlands, Colombia, Kenya, Ecuador and Israel. Since a few years,
Ethiopia has joined this list, while Israel’s position has weakened.
A comparison of last year’s figures with 2004 confirms that production growth took place in countries
around the equator. Since 2004, production area in Kenya has grown by 1,400 hectares, newcomer
Ethiopia by 1,568 ha, Ecuador by 421 hectares and Colombia by 300 hectares. In Israel and the
Netherlands, production area shrank. Given the rise in export value, the Netherlands nevertheless
continue to play a key role in the international flower trade, being both the largest importer of flowers
from outside the EU and the main supplier of flowers to other EU countries.
The astonishing growth of flower production in the countries around the equator, however, was not
gradually, and certainly not automatic. Producers were hit hard by the economic crisis. Production in
Colombia and Ecuador has even dropped in recent years.
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There is a general feeling that the industry faces a period of dramatic changes as it responds to the
challenges posed by economic conditions. Market demand is stagnating, while supply of flowers is
abundant. On the medium and long term, a moderate growth of only 2 to 4% annually is expected in
Western Europe’s cut flower markets. In addition, consumer demands, and subsequently trade
requirements, are becoming more demanding and increasingly differentiated. Demand for sustainably
produced and distributed products is rising.
As a result, margins are under pressure and playing rules are changing significantly in the flower
industry. The industry is evolving towards lean and transparent supply chains. Direct trade channels,
bypassing the auction system, are growing. An acceleration of technology and knowledge
development is witnessed, not only in cultivation, but particularly in the way flowers are traded.
Transactions are increasingly handled by means of computer systems. More than 60% of the roses
traded at the FloraHolland auction are sold through the remote buying system ‘KOA’. European
wholesalers offer products in their own online webshop, where customers (wholesalers and retailers)
can buy directly from stocks. Trade becomes virtual making accurate exchange of information critical.
Another important trend that can be noticed is the increasing relevance of social and environmental
standards in the European flower trade. New patterns of consumption, media pressure, and
campaigns by non-governmental organisations (NGOs) have generated consumer interest in the
conditions under which flowers are produced in the developing countries. Nowadays, the market is
characterised by the existence of a multitude of standards in the form of certification schemes, codes
of practice and a handful of consumer labels. One of the reasons for this large number of co-existing
certificates is the fact that retailers tend to adopt those standards which best meet their needs. There
is even a strong trend among large retailers to set up their own private standards. So, although
fragmented, the importance of standards in the European flower is increasing1 (ProVerde 2010).
It is expected that high-tech developments and ever stricter requirements for suppliers continue in the
future and will increasingly determine who is allowed to participate in these chains. Further growth of
flower cultivation in East Africa will depend for a large part on the ability to adapt to these changing
conditions.
2.2
Leading flower exporting countries: the big five
The five leading global flower exporters in terms of export value of this moment are the Netherlands,
Colombia, Kenya, Ecuador and Ethiopia. These countries are competing with each other on the same
markets in Europe, Russia, and North-America and competition is getting tenser every year. This
increased rivalry is partly due to stagnating demand, but also as a result of the growing number of
large-flowered roses grown in Africa and the generally improving quality of the African products.
Ecuador, and to a lesser extent Colombia, are exporting more flowers to Europe and Russia then a
few year ago. Russia has already become an important market for Ecuador. Colombia is also
increasingly targeting European markets, which traditionally are supplied by Dutch and African
flowers. Kenya and Ethiopia have started to supply the Russian market as well.
Competition on the North-American market is also increasing. Ecuador is looking to increase its
market share in the coming years. Kenya is still struggling to develop its exports to the USA, despite of
the absence of import duties. US airlines and the Kenyan government are discussing possibilities of
opening up direct flights between the two countries.
1
Moreover, as a form of industry self regulation, producer associations in developing countries have also become
quite active in introducing new standards and codes of practice. Examples are the Kenya Flower Council with
their KFC Code of Practice and Asocolflores, Colombia with their Florverde standard, and the Code of Practice for
Sustainable Flower Production by the Ethiopian Horticulture Producer and Exporters Association (EHPEA).
The Global Competitiveness of The Kenya Flower Industry
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2.2.1
Kenya
Area
Export volume
Export value
(in hectares)
(in tonnes x 1,000)
in million euro
4,000
3,400
3,500
3,000
2,500
2,000
140
100
2,000
117
120
88
1,000
500
20
2004
UK
17%
230
Germany
66%
Other
100
0
2004
2010
Netherlands
200
0
0
12%
5%
300
60
40
500
500
400
80
1,500
600
Main destinations
2010
2004
2010
Source: Vakblad voor de Bloemisterij, Kenya Flower Council (2011)
The Kenyan flower industry has grown tremendously since the turn of the century. In 2000, production
area was an estimated 750 to 1,000 hectares with about 38 thousand tonnes of flowers being
exported. In 2004, the sector had already grown to 2,000 hectares. Now, there are about 3,400
hectares of flowers (greenhouse and outdoors) with 117,000 tonnes of flowers exported last year.
Kenya grows mainly roses, carnations, statice, alstroemeria, lilium and a variety of summer flowers.
Kenyan companies have long benefited from a strong euro, making their costs in Kenyan shillings and
US dollars relatively low. This advantage continues as the Kenya shilling lost 40% of its value against
the euro since January this year (as of November 2011). Labour and energy costs are low compared
to other countries. Kenyans still pay no import duty when exporting to Europe.
Growth, however, has not always come easily in Kenya. Particularly the last years have shown to be a
challenge. In 2008, Kenya was confronted with political unrest which had an effect on the sector for a
few weeks. Flowers could only be exported with difficulty and some farms did not get the flowers out
for some days. That year, the sector also faced increasing transportation costs due to high oil prices.
In 2009, there was the economic crisis that resulted in low prices. That same year, a long period of
drought began that lasted for some time into 2010. In 2010, there was the Icelandic ash cloud and the
weakening euro against the dollar. Air freight costs increased and heavy rains last year affected
production. On the other hand, prices were generally better in 2010 than the year before.
The problems meant that there was hardly any expansion in 2009 and plans for 200 additional
hectares were put on hold. In 2010 and 2011, Kenya returned to growth, partly because many farms
are switching from small- to large-flowered varieties. The market asks for this assortment. Because
large varieties are less productive, growers expand to maintain overall production level.
2.2.2
7,000
Netherlands
Area
Export volume
Export value
(in hectares)
(in tonnes x 1,000)
in million euro
700
6,100
608
639
3,500
600
3,000
5,000
500
2,500
4,000
400
2,000
3,000
300
1,500
2,000
200
1,000
1,000
100
500
0
0
0
6,000
5,331
2004
2010
2004
2010
3,000
Main destinations
3,151
Germany
29%
31%
UK
France
Italy
4%
5%
Russia
17%
14%
2004
Other
2010
Source: Vakblad voor de Bloemisterij, HBAG (2011)
The Dutch floriculture industry is widely known as the leading industry in the world. The Netherlands
has quite advanced methods of production and innovative marketing mechanism. Growers are
supported by well-developed services in terms of research and development, and an efficient
distribution system that is well connected by air and by ground transportations with the most important
producing and consuming countries. The driving force for the success of the industry is related to the
The Global Competitiveness of The Kenya Flower Industry
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crucial role of the auctions, the well developed infrastructure, a drive for innovation and a strong sense
of cooperation. (Kargbo 2010, Worldbank 2009).
Nevertheless, Dutch flower production is struggling. Outdoor production has grown in recent years by
about 385 hectares since 2004, but production in greenhouses declined by no less than 1,154
hectares. Costs for labour, energy, land and greenhouse construction are high, government regulation
is relatively strong, and the impact of the economic crisis is also felt in the Netherlands.
All factors translate into an increasingly disadvantageous competitive position towards other producing
countries. Illustrative is the strong decrease in the rose sector, which is directly affected by production
growth in Kenya, Ethiopia and Ecuador. Rose production area fell from 748 hectares in 2006 to 499
hectares last year. Before roses, carnation and gypsophila suffered similar fate. Also some summer
flowers such as hypericum, solidago and eryngium are mostly gone abroad.
Fig 1. Applying the Porter Diamond to the Dutch floriculture industry
Source: Worldbank (2009)
To offset the high costs, Dutch growers need high yields. This leads many of them to intensive
cultivation of species with a high production. On an area smaller than that of Colombia, the Dutch
produce more flowers. The Netherlands is also renowned for its broad assortment which is available
within 24 hours, 365 days a year.
Notwithstanding the decline in production area, the Netherlands' position in the global cut flower trade
remains unique. Besides a major producer of flowers, the Netherlands is the commercial and logistical
hub of many flowers from countries like Kenya, Ethiopia, and Israel. On balance, the export value of
flowers traded by or through the Netherlands increased. Even without imports, the Netherlands would
be the largest exporter in the world.
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2.2.3
Colombia
Area
Export volume
Export value
(in hectares)
(in tonnes x 1,000)
in million euro
8,000
7,000
6,500
6,800
250
200
6,000
5,000
220
184
1,000
Main destinations
858
9%
2%
4%
4%
5%
800
150
600
100
400
50
200
0
0
568
4,000
3,000
2,000
1,000
0
2004
2010
2004
2010
USA
Russia
UK
Japan
76%
2004
Netherlands
Other
2010
Source: Vakblad voor de Bloemisterij, Asocolflores, DANE (2011)
Colombia kicked off production of flowers in the 1960s. Known for its large companies with a broad
assortment, the country developed into the leading flower supplier to the North American market.
Production expanded rapidly thanks to an ideal climate for growing flowers year round, the Colombian
entrepreneurship, abundant water resources, good air connections, and cheap labour.
Since the early 1990s, flowers have been allowed to enter the US under preferential import tariff rates
as part of the Andean Trade Promotion Drug Eradication Act or ATPDEA, an incentive programme in
the fight against drugs. Half February 2011, the ATPDEA was expired. As a result, US importers had
to pay 3.2 to 7% tax on Colombian flowers. Recently, a new Free Trade Agreement (FTA) was signed
that extended the ATPDEA allowing flowers again to enter the US without import duty.
In 2004, the situation was becoming more difficult mainly due to the local currency. The peso was very
strong against the dollar, which resulted in low incomes from their main export market, the USA. Farm
incomes were further affected by high inflation rates. Despite these problems, the area under
cultivation of flowers managed to increase from 6,500 hectares in 2004 to 7,300 hectares in 2007.
The strength of the peso remains a major concern to Colombian growers. Main cause of the high
exchange rate is an increased flow of dollars coming into Colombia because of the improved safety
and the discovery of oil and other resources, which attracts foreign investors. Farmers complain
bitterly about the strong peso / weak dollar, high transport costs and high inflation. One of the main
costs for Colombian flower growers is labour, which has risen sharply in recent years. In addition,
exports to the USA were also affected by the economic crisis. Finally, the sector has been hit severely
by weather problems in the past years.
Colombian growers are open to innovations and have developed for instance strong expertise in
biological soil decontamination. Some companies have been growing successfully in the ground for
years without any form of disinfection with chemicals or steam. Most flowers are growing in plastic
greenhouses and in open air. Colombians have experience in sea transportation, amongst others
thanks to the so-called Merlin project, which lasted three years and was initiated by Asocolflores.
In summary, production costs increased while revenues are disappointing. Banks have little
confidence in the sector and are reluctant to lend money. With all these problems, Colombian growers
have been looking for buyers outside the USA, in the UK, Mexico, Japan and Russia. Adaptations in
assortment and growing techniques, new transportation technologies, and marketing efforts are all
deployed in an effort to make this strategy successful.
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2.2.4
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Ecuador
Area
Export volume
Export value
(in hectares)
(in tonnes x 1,000)
in million euro
3,821
120
100
3,400
96
102
80
60
40
20
0
2004
2010
2004
2010
450
400
350
300
250
200
150
100
50
0
Main destinations
393
11%
4%
4%
240
9%
USA
Russia
41%
Netherlands
Italy
Canada
31%
2004
Other
2010
Source: Vakblad voor de Bloemisterij (2011)
More than 75% of production area in Ecuador is roses. Climatic conditions including high light intensity
and day/night temperature variations allow for deep, intense colours and excellent shelf life. The
climate, combined with efficient business management and good varieties, have made Ecuador an
important player in global floriculture. Developments, however, have been quite challenging.
At the beginning of the century, farmers faced difficult times as the country traded their national
currency the sucre for the dollar. Growers could no longer earn money from the favourable sucredollar exchange rate. Moreover, costs in the new dollar economy kept rising: inflation was a staggering
91% in 2000. Many farms went bankrupt. In 2004, there was a slight recovery. This occurred partly
because growers with their large T-hybrid roses began to focus more on the lucrative Russian market.
Ecuadorian roses are highly valued in Russia, particularly for celebrations like Women’s Day (March
8). In 2004, 8% of Ecuadorian flowers were exported to Russia. In 2010, it had increased to 31%.
Positive developments also took place in infrastructure. Many roads have been improved. A new
airport is under construction that should be ready in 2012. The new airport will make required
stopovers unnecessary. Fully loaded planes can fly directly to their final destination thanks to the
longer runway and lower altitude of the airport. Increased competition between airports will also help
to bring down airfreight costs. In recent years, Ecuador has built experience in shipping flowers by
sea, mainly hypericum, gypsophila and carnation. Expectations for roses are not high.
Over time, the US market has become less important for Ecuador. The US market increasingly asks
for big volumes, which can better be met by Colombian growers. To make things worse, since
February this year, US importers have to pay duties ranging from 3.4 to 6.8% on flowers from Ecuador
as the ATPDEA was allowed to expire. Roses have found new markets, while most summer flowers
are still going to the USA and Canada.
The last three years, Ecuador is back in heavy weather. Times are even harder than in the beginning
of this century. A major problem for growers is the fact that wages have risen enormously in a short
time. Five years ago, the minimum wage was US$ 120 per month. Now it is US$ 268 and further
increases are expected. What’s more, actual costs of wages are much higher as employers are
expected to provide breakfast, lunch, insurance, medical care, clothing, transportation and two extra
months of salary per year.
In 2009, the industry’s impressive growth ended and revenues decreased by 5%. The year 2010 was
also difficult with similar yields and rose production hit by a period of cold weather. Summer flowers
(Gypsophila is the leading product) did better last year as demand from the USA remained good. The
recent poor years, especially in roses, have affected acreage (-10% in 2009 alone).
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2.2.5
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Ethiopia
Area
Export volume
Export value
(in hectares)
(in tonnes x 1,000)
in million euro
1,600
60
50
50
20
2010
Netherlands
80
Germany
60
Other
40
20
1
84%
5
0
0
2004
8%
8%
100
30
10
146
140
120
40
32
160
Main destinations
2004
2010
2004
2010
Source: Vakblad voor de Bloemisterij, EHPEA, Eurostat (2011)
Newcomer among the big boys of global floriculture is Ethiopia. Until 2004, there was no significant
flower industry in the country. Seven years later, according to official sources, the sector counts 1,600
hectares of which the lion’s share is taken up by rose farms, with some diversification into cuttings and
new products such as hypericum, gypsophila, lilies, and freesias. Reportedly, not the full 1,600 acres
is in production. Floriculture is now one of Ethiopia’s main export sectors.
An important stimulator for this strong development of the floriculture sector has been the Ethiopian
government. Wages are low, considerably lower than in Kenya. The Dutch government also
contributed to the development of the sector. In recent years, 32 Dutch agricultural companies have
received a PSI grant2 for Ethiopia.
The first successful large-scale producer of roses was an Indian investor who contracted specialists
from Israel. Later, Dutch producers entered the market. Especially important was the entry of SherEthiopia, a leading Dutch company and by far the largest developer of greenhouse production in
Ethiopia. In contrast, the role of national agricultural research and extension services seems to have
been quite insignificant for the development of the industry (Tilman Altenburg, 2010). Nowadays, the
inland cold chain functions relatively well, especially since refrigerated trucking service providers exist
in the country and are used extensively by exporters.
The enormous growth in production did not come easy. With regards to the enabling environment,
major bottlenecks were strict regulations concerning repatriation of foreign exchange earned on
exports, lack of adequate pesticide regulation, weak phytosanitary inspection and no protection of
breeders’ rights. (Gebreeyesus 2009). Just like the other countries, Ethiopia’s young sector was hit by
the economic crisis. Several companies went out of business or were taken over by the bank. Many
new local companies still lacked knowledge and experience in the cultivation of roses to counter the
difficult times. A part of the farms that stopped was continued by Sher.
Innovation in the flower industry is largely driven by foreign investors. Ethiopian investors, however,
have been able to emulate their business models. Most roses are sold through the Dutch auctions.
Only a limited number of firms sell directly to wholesalers and supermarket channel. Few rose growers
have developed their own marketing or partnerships arrangements in the export markets. (GDS 2011)
2.3
Other countries
China
China is a large producer and exporter of flowers in Asia. In 2009, Chinese wholesale value of
production reached US$ 1,172 million (Kargbo 2010). However, cultivation is very inefficient and only
accounts for 0.5% of the world's total supply. At present, levels of floriculture research and managerial
2
The Private Sector Investment programme, PSI is a subsidy programme of the Dutch Ministry of Foreign Affairs
that supports innovative investment projects in emerging markets. A PSI project is an investment project,
implemented by a Dutch (or foreign) company together with a local company, in one of the eligible developing
countries. Investments that meet the criteria are eligible for a financial contribution to the costs of the investment.
The Global Competitiveness of The Kenya Flower Industry
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skills are limited, but available land is cheap and domestic consumption levels are booming. The
industry has good-spirited entrepreneurs and the government supports the development of the sector.
China has the potential to become the largest world producer of flowers in the near future because of
the large investment directed in the industry by the government, excellent infrastructure, and
favourable production factors. It has the largest potential market in the world and flower consumption
is expected to increase as the economy grows. The main direction for the Chinese flower industry will
be to further develop its home market, improve assortment and delivery systems. China is not
expected to become a direct competitor for Africa on the European market in the coming years.
Egypt
The floriculture industry in Egypt is modest. There are about forty professional firms, most of which are
located in the Nile delta. The largest is 40 hectares, followed by two companies of 25 hectares, the
rest being smaller. Growers have a wide assortment including houseplants. Egypt also has countless
small family companies of some 1,000 m2 or smaller. The majority produces for the local market,
which is large in Egypt. The home market is also important to the more professional companies.
Another part goes to the Gulf region. Only a small portion goes to Europe, of which 80% is sold via
FloraHolland. Important Egyptian export products are carnations, carthamus, ammi and gypsophila.
A study conducted by the Egyptian government showed that there are growth opportunities, but there
is still much to be done. After harvest, flowers do not always get the right treatment and quality varies.
Egypt will not compete with Kenya and Ethiopia as the climate is not suitable. The season runs from
October to June. In summer, it is too hot so year-round production is not possible. Egypt should,
however, be able to compete with countries like Israel and Turkey. Advantages of Egypt are cheap
labour and electricity, and there is enough water. (Middelburg 2009)
India
India is fast becoming a strong centre of floriculture production. Production is principally targeting the
growing local market. The large number of flowers commercially grown in India is generally of two
types: loose flowers and cut-flowers with stems. Both these types are grown mainly under open field
conditions and partly under a protected environment. India is probably the largest producer of flowers
after China. Still, India’s present contribution to the global floricultural export market is negligible (less
than 0.5%). Nevertheless, floriculture is at present a priority and identified thrust area in India. National
policies, budgetary allocation, diversification of horticultural products, liberalised imports are clearly an
indication that the country is committed to development in the field of horticulture including floriculture.
Israel
The floricultural area in Israel has been shrinking considerably and continuously during the past ten
years. The number of stems exported fell from 1.35 billion in 2004 to 878 million last year. Growers
face strong competition from African and to a lesser extent, South American countries. Production
costs are higher because labour, land and water are scarce. For years, the Israeli growers have
difficulties obtaining work permits for Thai workers of whom they are so dependent. In addition, the
Israelis had to deal with the economic crisis. A severe frost period in early 2008 brought a heavy blow
to the sector. Finally, the exchange rate between the euro and shekel was not always favourable for
exporting flowers to Europe, which is their main market. Many growers were forced out of business,
especially smaller farms and farms where the second generation did not take over the business from
their elderly parents.
Over the past years, there has been a strong trend towards Israelis adapting their product range. Rose
production has virtually disappeared, while many growers switched to paprika or foliage. Foliage can
be transported by boat to Europe, saving costs. Production of flowers such as gypsophila and solidago
has decreased due to strong competition from Africa and South America. Waxflower (Chamelaucium)
and Ruscus have become major products. Besides foliage, Israeli growers focus more on exclusive
products, which cannot be grown on a large scale in Africa. The new focus has not prevented that
floriculture in Israel has fallen back.
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South Africa
A wide range of flowers and plants are produced in South Africa. Most horticultural products are
destined for the local market. Some products are exported to Europe, but freight costs are
considerably. In addition, most growers are too small. They often have a too broad assortment and
consequently insufficient volume of a particular product to export. But there are exceptions, like a
chrysanthemum company of several acres that directly export to England.
For several decades, South Africa has been an important producer of cuttings. Kalanchoe and
chrysanthemum cuttings are some important crops.
Labour costs are relatively high because of the rising prosperity and growing power of the unions.
South Africa is no longer the cheap country where breeders quickly set up a nursery. Propagation of
bulbs still has good potential. Not surprising, as several bulbs originate in South Africa. The country
has many different climates and soils. Tropical crops such as Protea grow well in the open air. Such
crops have a considerable share in the floriculture package that is exported to Europe.
Tanzania
Rose is the main ornamental crop. Nurseries are located especially in the north, around the town of
Arusha. Most companies exist already for over ten years. In the beginning, the government assisted
the industry with tax exemption for a certain period and cheap land. There have been investments,
particularly in greenhouses for roses. But other crops like summer flowers are following suit. The same
goes for the cuttings and seed production. Government support, however, ceased for a while which
hampered further development of the sector.
Not all farms are managed optimally. This leads to crop failure and low production. The current low
prices, however, affect not only the companies that underperform. The whole development of the
floriculture industry in Tanzania has come to a standstill (Middelburg 2009). Still, political stability,
good water, climate and low production costs make the country a popular location for ornamental
growers.
In 2004, TAHA, the Tanzanian Horticultural Association, was founded. Improving air and road
networks are some focal points. The recently established Horticultural Development Council of
Tanzania is also concerned with "horticultural business”. Also the Tanzanian government is again
promoting horticulture with funding and land. Airfreight is not always available and sometimes growers
need to truck a few hours to get a suitable flight.
Uganda
Rose is the most important ornamental crop in Uganda. About 80% of exported flowers are roses. The
flower industry is now about fifteen years in the country. A small proportion of the pioneers of the early
years are still active. There are currently about fifteen exporting companies, of which about half is fully
owned by Ugandans. Most companies are located in southern Uganda, between the cities of Entebbe
and Kampala near Lake Victoria. Over the years, cutting production has become increasingly
important. Not in area, but for employment and export value. Of the exported value around 40% is
derived from chrysanthemum cuttings.
Rose growers are facing difficulties. Due to the high day temperatures it is not possible to grow large
buds in the traditional rose growing regions. Earning money with the small-flowered roses was already
difficult due to declining demand and the rising number of intermediates. Growers tried to remain
profitable with a strategy of high production and low costs. Export growth in recent years, however,
has stopped.
According to Uganda’s national paper (VC5), the critical constraints to the competitiveness of
Ugandan horticulture are:
 Inadequate infrastructure and weak systems to support business.
 Power shortages.
 Limited air freight and transport facilities.
 Limited access to, and high cost of, finance
 Ambiguous land tenure system.
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 Sanitary, phytosanitary (SPS) and other trade-related standards and institutions need improved
capacity.
 Inadequate research and development.
 Multiple taxes and charges with similar effects
Zimbabwe
Thanks to a favourable climate, cheap labour, good infrastructure and land fertile, Zimbabwe was
once a country that mattered in floriculture. But currently it is only a marginal player. In its heyday in
2001, Zimbabwe was the number 3 foreign supplying country to the Dutch auctions with a turnover of
70 million euro. The same year problems started. President Robert Mugabe launched a disastrous
land expropriation policy. Thus, the area of rose production collapsed from 425 hectares to 150
hectares in 2011. There are also still some summer flower nurseries with products such as Hypericum,
Bupleurum and Carthamus. Many are exported directly bypassing the auction system.
The remaining growers have a hard time. The economy has come to a standstill, inflation is sky high
and unemployment is around 90%. Because of the uncertain situation, they have not invested for
years in greenhouses and assortment. Rose growers focus on small-flowered roses and that segment
is under pressure. There are doubts whether it will get better over time. The political climate is still far
from stable, impeding foreign investments.
3 Policies and incentives towards floriculture
3.1
Role of government policies
In a recent World Bank Technical Paper (Jaeger 2010), it is argued that a commercial horticulture
sector needs government policies that provide an environment in which the sector can thrive. It does
not need direct intervention from the government in its activities; rather government should recognise
the need for a vigorous private sector as the engine of commercial growth. Five areas are identified in
which government policy can provide an active support to commercial horticulture:
Infrastructure: A usable transport infrastructure is critical. Not only do poor roads increase transaction
costs, but produce is highly perishable and often easily damaged. Secondly, airport services, including
cold store facilities, need to be adequate to secure a closed cold chain. Lastly, improvements to the
infrastructure of water, health services and education all lend support to developments of the rural
economy.
Investment: Government must recognise the importance of investment both from domestic sources
and foreign investors. It is the larger farms that drive the sector forward that will provide employment
and generate the critical mass to attract buyers and transporters. In particular it is important to
recognise the potential contribution from foreign investors who bring in not just funds but also technical
knowhow as well as management expertise and very likely market linkages too. As witnessed in
Ethiopia, their contribution to a young floricultural sector can be enormous. Support might include:
 A simplified investment code.
 Support to land acquisition: the identification of available land, the titling of the property, and the
acquisition by lease can all take unduly long and will discourage investors.
 Appropriate fiscal incentives: tax incentives are not always useful when broadly applied through
holidays for investors, but tax breaks to support specific activities can have a more precise effect.
 Support to inward investors, a one‐stop‐shop for information, guides and official paperwork.
Institutional: institutional coordination and innovation are the hardest aspects of directing government
policy. For the business community it is important to reduce the bureaucratic overhead that adds to
the cost of doing business.
Innovation: a key component of competitiveness is the ability to innovate. Without an innovative
capacity any industry will fall behind its competitors. Innovation can be encouraged by:
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 Innovative companies might be given tax relief on their research and development spending.
 The government might bring in specific technical assistance where there are particular problems.
 An active agricultural research programme delivered through a widespread extension service.
Human capital: We have found that an important constraint is often the quality of the workforce. The
training of unskilled labour puts a major cost onto any flower farm. The shortage of supervisors and
middle‐managers can be critical to the survival of a flower industry. Training schemes to encourage
the development of middle‐management are needed. And finally senior management: export
horticulture in particular demands a set of managerial skills that are not readily available. Foreign
investment is often important to bring in this capability.
3.2
Policy and policy guidelines in the leading flower exporting countries
This section offers a bird’s eye view of the key government policies towards the flower industry in the
major flower growing countries. It is determined to what extent these policies support competitiveness
of the flower business.
3.2.1 Kenya
Government
The Ministry of Agriculture is the lead agent in agricultural transformation in the country. The ministry
provides overall policy, regulation and operational direction. Other ministries whose mandates directly
impact on horticulture include Water and Irrigation, Health, Environment and Natural Resources, Local
Government, Cooperatives development and Marketing, Trade and Regional Development
Authorities.
In June 2011, the Kenyan government made public its final draft of the National Horticultural Policy,
which is tabled for approval by the parliament in the course of 2012. The new policy shows continued
government recognition of the role of horticulture (and more specifically floriculture) for Kenya. It offers
policy interventions for production, support services (financing the industry, research and extension),
marketing (local, regional and export markets), infrastructure as well as regulatory and institutional
arrangements.
The policy document states that the broad objective of government intervention is to accelerate and
sustain growth and development of the horticultural industry in order to enhance its contribution
towards food security, poverty reduction, employment and wealth creation. More specifically, policy
objectives for the realisation of the broad objective are to:
i) Facilitate increased production of high-quality horticultural produce.
ii) Enhance provision of the subsector’s support services.
iii) Promote value addition and increase domestic and external trade.
iv) Establish and develop infrastructure to support the horticulture industry.
v) Establish and strengthen institutional, legal and regulatory framework in the horticultural industry.
vi) Promote mechanisms for environmental sustainability and other cross-cutting issues.
Taxes and levies
The fourth video seminar (VC4) in this series covered the “Impact of Taxes & Levies on the Flower
Industry in Kenya”. The Kenyan team recognised the following tax reforms for greater productivity:
 10 year corporate income tax holidays.
 10 year withholding tax holiday on dividends and other remittances to non-resident parties.
 Perpetual exemption from VAT and customs import duty on inputs (greenhouses, greenhouse
covers, cold chain systems).
 Dam construction and irrigation equipments.
 Capital equipment and other resources.
 Perpetual exemption from payment of stamp duty.
 Subsidised financing loans.
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Furthermore, an overview was given of the taxes and levies in the flower industry:
 Export levy of Kshs 0.2 per kilo of every produce being exported – HCDA.
 Local market levy per weight or by tonnage of the truck – Local Authority.
 A phytosanitary services levy Kshs 0.2 per kilo of produce exported.
 Phytosanitary certificate levy of Kshs 400 per certificate – KEPHIS.
 Water levy of Kshs 0.37 per litre of irrigation water – WARMA.
 A minimum levy of US$ 400 for composting organic matter – NEMA.
 Tax on land payable to the local government.
 Personal and income taxes for all the permanent and pensionable staff.
It is clear that the Kenyan flower industry being a more mature sector still enjoys considerable tax
benefits, particularly aiming at attracting new investors.
Other public sector partners
Kenya Plant Health Inspectorate Services (KEPHIS)
KEPHIS is responsible for regulating plant health issues relating to phytosanitary and seed matters. In
order to effectively fulfil its mandate, KEPHIS has formed the Plant Variety Protection, Seed
Certification, Phytosanitary Services, Agro and Agri-input Formulation Analysis and Farmer Advisory
service units.
Horticultural Crops Development Authority (HCDA)
HCDA has the mandate to facilitate the development, promotion, facilitation and regulation of the
horticultural industry in Kenya. The organisation is divided in six divisions: Finance and Administration,
Human Resources, Information Technology, Strategic Planning and Marketing, Extension and
Training, and Nursery Services and Pilot Projects. Over the years, changing government policy and
international market requirements have necessitated a re-orientation in the regulation of the industry.
Currently HCDA focuses on its regulatory duties. The organization has prioritised its horticultural
information services, and is the main provider of horticulture production and trade data.
PCPB, KEBS, EPC and NEMA
 The functions of the Pest Control Products Board (PCPB) are to regulate the importation,
exportation, manufacturing, distribution and usage of pesticides.
 The primary function of the Kenya Bureau of Standards (KEBS) is to promote standardisation in
commerce and industry.
 The Export Promotion Council (EPC) is established with the mandate of developing and promoting
Kenya's exports. EPC's primary duty is to identify and address constraints facing exporters and
producers of export goods and services.
 The National Environmental Management Authority (NEMA) is the principal instrument of
government in the implementation of all policies relating to the environment.
3.2.2 Netherlands
Currently, the following policy instruments are used by the Dutch government:
 Subsidies (innovation investments; demonstration projects).
 Tax reduction on sustainable investments.
 Rules/directives, for example EU’s CO2 cap-and-trade system.
 Guarantees, for example for geothermal projects (risk reduction).
 Support to research and extension.
In the Netherlands, the tax system is fairly general, while other countries may have more specific
agricultural facilities or other favourable facilities. However, a broad range of investment incentives
exists: free depreciation of environmental investments, accelerated depreciation for starting
entrepreneurs, an investment allowance, the energy saving investment allowance and the
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environmental investment allowance. The Netherlands offers a broad range of additional tax credits. In
the Netherlands, investment incentives, the agricultural arrangement (support to knowledge system)
and the rules for loss transfer are particularly beneficial and places this country in the category of
countries with the most supportive tax system in the EU. (Veen 2007)
In a recent presentation, the Dutch Ministry of Economic Affairs, Agriculture & Innovation (EL&I) stated
that the new government (installed last year) has set a general policy for the agricultural sector, aiming
to promote sustainable, viable, innovative and internationally competitive agribusiness. The new
industrial policy is very specific about leaving room for entrepreneurs to do their business and to grow.
The new government has chosen nine so-called ‘top sectors’ to focus on for further strengthening.
Each top sector has been asked to form a ‘top team’ (with representatives of companies, scientists
and government), who advises the Minister on ambitions and priorities of the sector. ‘Horticulture and
Source Materials’ is selected as one of nine top sectors of the Dutch economy. The horticulture top
team has recently offered its policy recommendations to the minister. Seven key elements were
articulated: 1) doubling the growth in added value, 2) being a world leader in international enterprise,
3) being an international hub for knowledge exchange, research and education, 4) sustainability, 5)
optimisation of space and infrastructure for the entire chain, 6) a strong image and an internationally
leading brand, and 7) a decisive and responsible sector organisation.
Private Sector Investment programme (PSI)
During VC5 participants inquired about the PSI-programme and its impact in East Africa. The PSI
programme (successor to the PSOM programme) is a subsidy programme of the Dutch Ministry of
Foreign Affairs / Development Cooperation that supports innovative investment projects in emerging
markets. A PSI project is an investment project, implemented by a Dutch (or foreign) company
together with a local company, in one of the eligible developing countries. If this investment meets the
criteria, it can be eligible for a grant by PSI. This grant consists of a financial contribution to the costs
of the investment. Under certain conditions, up to 50 percent of your investment will be compensated.
PSI is a tender programme. Companies are invited to submit applications twice a year. Submitted
projects are judged, among other things, by their standard of local innovation. One of the beneficial
side effects of PSI is that it introduces developing countries to new knowledge. Furthermore, both
parties must be financially sound. In addition, the scale of planned expenditure must ensure further
investments in the foreseeable future.
Table 1. Total PSOM/PSI expenditures on
horticultural projects in East-Africa
Expenditures
Period
Ethiopia
€ 10,808,217
2003 - ongoing
Kenya
€ 5,174,761
2004 - ongoing
Tanzania
€ 4,965,155
2002- ongoing
Uganda
€ 6,190,102
1999 - ongoing
Total
€ 27,138,235
Source: NL EVD International (2011)
PSI is available to Kenya, Ethiopia, Tanzania and Uganda. However, in the case of Kenya, only Dutch
companies may submit applications for these countries. In the case of Ethiopia, Tanzania, and
Uganda, businesses from all countries may submit applications, except for businesses from the
project country itself.
 More information about PSI can be found at: http://www.agentschapnl.nl/en/node/50050
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The Dutch agricultural knowledge system: education, research and extension
The Dutch government has always been strongly supporting the agricultural knowledge system. From
the beginning, the system consisted of a close interaction between the agricultural education system,
research and extension system. The exchange of information and transfer of knowledge, based on a
strong infrastructure for scientific research and education, has led to a tremendous improvement of the
Dutch knowledge basis and to a corresponding high level of innovation. The Ministry of Agriculture
was responsible for the entire agricultural education system in the Netherlands.
The system, however, has changed over the past twenty-five years, not only in the organisation of the
knowledge system, but also in the interaction between the companies and the research organisations.
Now, the knowledge system is in the middle of a transition towards new concepts of co-innovation, in
which industries and research centres operate together in new and more open forms of collaboration.
See Appendix 1 for more information on the agricultural knowledge system.
3.2.3 Colombia
The Colombian government has been quite actively supporting the development of the flower industry
and helped to create a favourable environment for the production and export of flowers from as early
as the 1960s. Government policy improved macroeconomic stability and encouraged an expansion of
non-traditional exports. Relevant aspects of the reform package were:
 Formation of ProExport, which helped finance exporting companies and provided some investment
around necessary infrastructure. It was also associated with trade and investment promotion.
 Creation of export tax credits, which were essentially a tax incentive to export.
 Creation of Plan Vellejo, which gave duty exemptions for raw material imports used for export
production.
Apart from these policies, the Colombian government also prioritised trade agreements that would
help ensure preferential access to primary markets for floral products. (Brenthurst 2007)
Mid 2011, the Colombian government announced that the country will continue investing significantly
in the floriculture sector. Eight specific stimuli proposals will be introduced to further strengthen the
industry. The proposals encompassed a variety of measures, ranging from the abolition of a 5 percent
import tax on chemical compounds used in agriculture, to a 6 million dollar investment by the
Colombian Agricultural Research Corporation (Corpoica) that aims to stimulate innovative research
and development.
Current subsidies and incentives for flower producers:
1. ICA - Phytosanitary Incentives: Through this program, the Ministry of Agriculture and Rural
Development (MARD) aims to support proper phytosanitary handling and maintain employment
generated in the flower sector. Producers receive a payment per hectare if they have proved to
comply with phytosanitary requirements of the Colombian Agricultural Institute (ICA).
2. ICR - Rural Capitalisation Incentive: The incentive is an economic benefit granted to a natural
person or legal entity who makes investments directed towards modernisation, competitiveness
and sustainability of agricultural production.
3. IAT - Technical Assistance Incentive: This incentive is an aid granted to trade organisations by the
Ministry to finance 80% of the total expenditure on delivery of technical assistance services to
producers in the sector.
Asocolflores
Governmental policy has long promoted the activities of sector associations. The Colombian success
in floriculture, however, can also be attributed to the efforts of Asocolflores, the Colombian Association
of Flower Exporters, representing more than 75% of total flower exports from Colombia. It was
established in 1973 as a ‘promotional, advisory and representational’ entity of flower exports.
Asocolflores is deeply involved in various R&D initiatives, ranging from joint projects in science and
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technology with the American Floral Endowment Fund and a number of US universities to Ceniflores,
the Colombian Centre for Innovation in Floriculture.
Asocolflores created Ceniflores to back research, promote technological development and contribute
to improve the competitiveness of Colombian floriculture. The centre conducts research programs on
technological conversion, soils and substrates, integrated crop protection and extension. The
particular interest of the centre is to focus on how to improve efficiency in production and postharvest
processes, by defining the bottle necks and searching for solutions through the adoption or adaptation
of existing technologies. Ceniflores also coordinates the floriculture industry phytosanitary campaigns
in conjunction with ICA, in order to reduce the presence of pests in flower exports. In addition, to
support the Colombian farms in monitoring and control practices, Ceniflores has also put together a
training package for farm personnel. Information provided through manuals and videos is based on
verified information on pest habits, life cycle and management processes with recommendations for
improvement.
Asocolflores also has a range of social and environmental development initiatives. One such initiative
is Florverde, which is essentially a code of conduct aimed at sustainable environmental and social
responsibility in the floriculture industry. The Florverde Farm Program is a strategic tool to promote
sustainable floriculture with social responsibility at both the company level and industry-wide. Its
implementation ensures compliance with strict international social and environmental standards from
planting to postharvest. The Florverde Farm Program began in 1996 and is a long-term
comprehensive strategy geared toward optimising the use of resources and improving the quality of
life for workers and their families to improve competitiveness with the flower industry, while
encompassing the concept of sustainably development. Florverde certification is a Full Benchmarked
Scheme with GLOBALGAP
Finally, Asocolflores also initiated Proflora, which is a biannual cut flower trade fair, arguably the
world’s foremost and certainly the largest in the western hemisphere.
Asocolflores encourages a strong sense of cohesion among flower producers and promotes country
product recognition abroad. It assumes a national approach of coordination in response to the various
obstacles and challenges associated with production and export. Therefore local rivalry among
competitors gives way to broader goals of national competitiveness. (Brenthurst 2010)
3.2.4 Ecuador
The current government of Ecuador applies several tools to support entrepreneurship and productive
investments such as support funds, specific incentives, and promotion of investment projects. There
are no specific incentives targeting the development of the flower industry. Actually, several of the
incentives described below may very well affect farm profits. Furthermore, flower growers in Ecuador
have to pay a minimum annual tax whether they make profits or not.
InvestEcuador lists eight major groupings of government incentives:
1. General incentives: A number of tax reductions and exemptions, mainly targeting investments
related to improving productivity and technology, stimulate cleaner production and salary increases
and hiring new personnel.
2. Sector specific incentives: Twelve sectors have been selected for specific preferential initiatives.
Floriculture, however, is not among them!
3. Disadvantaged zones: When operating in a disadvantaged geographic zone, companies receive a
deduction of 100% of the cost of hiring new workers for 5 fiscal years.
4. Innovation and exportation: This tax reduction applies to reinvestment of profits in new equipment,
assets, plant material, etc. all used for productive activity, research, technology or otherwise
improves productivity, generates productive diversification or increases employment.
5. Democratisation of capital: An incentive to share company ownership with employees (may defer
payment of income tax and advances for 5 years).
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6. Green production: Incentive to invest in more sustainable production (tax deduction related to
depreciation and amortization of machinery and equipment for cleaner production).
7. Micro-enterprises (MYPYMES): Range of incentives supporting companies with 1-9 employees and
sales below US$ 100 thousand (70% state guarantee for private investment financing; public
procurement system; state investment fund, etc.)
8. Free trade zones: Free Trade Zones with Andean neighbours and Chile offering, amongst others,
tax reductions and imports of goods at zero percent VAT rate.
Direct foreign investment may be executed in any productive sector without any prior authorisation
and under similar conditions and treatment of investments made by Ecuadorians. Foreign investors
are entitled to transfer abroad, in freely convertible foreign currency their net returns from their
international investments without limits, taxes or encumbrances. Investors have free access to stock
market and national finance system to obtain credit lines.
3.2.5 Ethiopia
The Ethiopian government has played a crucial role in the impressive growth of the floriculture sector.
Development of horticulture has become one of the top priorities of the Ethiopian government. Prior to
2003, however, there were few programs specifically targeting the flower industry. The export
promotion strategy adopted in 1998 made no mention of the flower industry. Although the flower
industry might have benefited from this broad export promotion support scheme, take-off did not occur
until industry specific support was provided by government. (Geebreyesus 2010)
When the success of pioneering firms became evident and the Ethiopian Horticulture Producers and
Exporters Association (EHPEA) was formed to lobby the government, additional incentives were made
available. By the end of 2002, government realised the opportunity offered by the flower industry and
actively engage in promoting the sector.
As described in more detail in Ethiopia’s position paper on the impact of taxes (VC3), the Ethiopian
government has introduced various measures and launched an all-out effort towards developing the
flower industry. They created attractive conditions for farmers to start in Ethiopia: low land rent,
income tax exemption of five years. The government also provided long-term credit on very generous
terms through the Development Bank of Ethiopia. Investors could borrow up to 70:30 debt-equity ratio
with no collateral requirement and against low interest rates.
Government has been engaged also in upgrading and formalising the institutions responsible for the
sector. Until recently, Ministry of Trade and Industry (MoTI) dealt with the private sector in the flower
industry. In 2002, it established a Horticulture Development Team which, in 2008, was upgraded to the
Ethiopian Horticulture Development Agency (EHDA) with the aim of providing faster and more
coherent services for horticulture exporters. The new agency is under the Ministry of Agriculture and
Rural Development. It has its own budget and freedom to hire staff without being bound by the general
rules of the civil service. The idea of creating such a semi-autonomous unit was to offer one-stop
services for investors in order to avoid cumbersome transactions with several layers of bureaucracy.
(Tilman Altenburg, 2010)
Also EHPEA has been a major force behind the growth of the industry. Its main goal is to promote and
safeguard the sustainable and competitive position of the Ethiopian flower industry. By using its logo
The New Face of Ethiopia' and by focusing on sustainable production, Ethiopia is gaining more and
more acceptance on international markets. (Ploeg 2009)
In sum, promotion of the newly emerging cut flower industry has benefited considerably from export
incentives and the good relationships between firms, the sector association, and public authorities,
which have helped to remove obstacles. According to Tilman Altenburg (2010), the generous
incentives offered to flower exporters come at a considerable cost. In addition to foregone taxes, the
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lease rate for land implies an extraordinary hidden subsidy. In principle, such subsidies are justified as
long as investors help to discover new business opportunities that can be emulated by others.
4 Driving forces for horticultural development
So far we have seen that a number of issues have had great impact on the development of the flower
industry in the leading flower exporting countries. A distinction can be made between internal and
external factors, which can or cannot be controlled by individual companies, organisations or
governments. Particularly external factors like climate, currency exchange rates and oil price
fluctuations have shown to have a major impact on the competitiveness of companies active in the
flower business.
Internal factors are determined in the first place by entrepreneurs themselves, but also governments
and sector organisations have played an important role. Other relevant actors are research and
training institutes, credit and finance institutions, quality and regulatory agencies, and trade and
investment promotion agencies. In some countries, the government plays an important role in
coordinating efforts of varies actors.
4.1
Impact of external forces
4.1.1 The currency triangle: euro - dollar - national currency
Inflation and the relationship between national currencies of producer countries and other currencies
have shown to be of extreme importance for the income of growers. Kenyans, for example, received
their revenues in euros and benefited so many years from the strong euro against the dollar. For a
long time, revenues were high while costs (for a large part paid in US dollars and local currency) were
low. The same was true for Ethiopian farmers. As the chart below shows, both countries benefit from
the weak local currency, respectively the Kenyan shilling and Ethiopian birr.
Fig 2. Exchange rate changes to euro: US dollar, Colombian peso, Kenya shilling and
Ethiopian birr
Period 1/1/2007 to 11/11/2011
Source: Oanda, ProVerde (11-11-2011)
In Colombia, on the other hand, a strong peso against the dollar has long been the reason for lower
profits. Ecuadorian growers have been affected by the fact that they lost their local currency and are
now operating in a dollar economy. In the Netherlands, exchange rate relations have also had a major
impact on the profitability of companies. An example is the weak British pound in 2008, which resulted
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in a dramatic drop of exports to the UK. British buyers instead turned to Colombian suppliers. Overall,
it is difficult to indicate what the currency rates in the coming years will look like.
4.1.2 Climate
Climatic conditions play a major role in horticulture. Some illustrative examples: Last winter, Colombia
had a frost period and in May growers were subjected to extremely heavy rainfall. Both had great
impact on flower production, outside and in unheated greenhouses. Last year’s disappointing rose
production in Ecuador was attributed to a cold period. In 2008, Israel was plagued by a week of night
frost, which had a major effect on flower production and resulted in the downfall of some companies.
Kenya had the last two years a long period of drought and a period of heavy rains. The first resulted in
a discussion on water use by growers in Naivasha. The second led to lower production and increased
pressure from diseases. Actually, the only country where production did not suffer from climatic
problems was the Netherlands, mainly because of heated greenhouses.
4.1.3 Oil prices
In 2008, the price of a barrel of oil increased to a staggering US$ 150. Growers around the world were
confronted with exploding costs. Kenyan growers, for example, whose costs are almost 70% oilrelated, feared the worst. Rising costs for transportation, chemicals, fertilisers and packaging would
undermine their competitive position considerably. The same was true for farmers in Ethiopia,
Ecuador, Colombia, and to a lesser extent, Israel. In the Netherlands, commotion arose about the high
price of gas, which is linked to oil prices. Six months later, the situation was completely changed. In
the spring of 2009, the price for a barrel of oil plunged below US$ 50 and growers were able to
breathe easily for a moment.
4.2
Internal factors driving development
Developments in the leading flower exporting countries showed us that a number of controllable
ingredients have had a critical impact on shaping an enabling business environment for entrepreneurs
in the flower industry:
1. Government policies
2. Sector cooperation
3. Research and development
4.2.1 Government policies
Experiences learn that the flower industry is highly dynamic and cannot be led by public initiatives
alone. The primary role of the government should be facilitative and indirect (laws and regulation for
foreign investment, intellectual property rights, technology transfer, air cargo licensing, foreign
exchange transaction etc.). Still, these are critical to the success of the sector.
The main task of public policy is to remove specific obstacles that are beyond the reach of individual
firms, for example to ensure free access to land, or competitive air freight rates; to subsidise
pioneering firms; to create opportunities for capability building; and reduce excessive and complicated
bureaucracy.
Tax incentives are used widely, particularly by East African governments. Mosioma (2007) explains
that justification of tax incentives is based on the argument that it will lead to job creation, know-how
spill over, facilitate backward/forward linkages to local economy and, in the end, will raise government
income. It is, however, not clear if these tax incentives provide a sustainable basis for achieving a
long-term economic development. The costs of such policies are considerable. There is also a risk for
a race to the bottom, meaning that East African governments compete by means of tax incentives.
Potential solutions lie in strengthening regional bodies to offer guidance in designing tax policies.
Examples in the Netherlands and Colombia, show that tax incentives can also be used moderately
and to target specific areas like innovation.
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4.2.2 Sector cooperation
Importance of sector cooperation and organisation cannot be overstated. In all leading countries,
private sector organisations are reasonable strong and active. They also enjoy a broad base among
producers and exporters. Differences exist in the scope of services these organisations provide. Some
associations are very active in promotion, others more in aspects like advocacy, research, training,
socio-environmental issues, logistics, etc.
The Colombian story illustrates that a real challenge and source of future success lies in a coordinated approach that creates national product recognition in foreign markets. The network of
Colombian producers, service providers, transporters, associations and researchers all strive for a
common goal. Brenthurst (2007) argues that this is Colombia’s real strength and the rationale behind
ongoing investment and R&D.
4.2.3 Research and development
Technology and innovation are ever more important playing cards in the international competitive
game. The Dutch, Israelis and Colombians are pushing forward. Growers are backed by government
incentives and well-developed agricultural research and development systems all striving to
strengthen the knowledge and efficiency in the sector. Areas of interest, also for African industries, are
cultivation techniques (productivity), market information, assortment (new varieties), sustainability,
logistics (sea transportation), communication technology, etc. The Netherlands demonstrated the
importance of close interaction between the agricultural education system, research and extension
system.
An abundance of information and research results is available in the Netherlands, Colombia and
Israel. This information can also be relevant to the Kenyan flower industry. Opening up these sources
and/or co-ordinating research activities in Kenya with related and experienced institutes abroad should
be considered. There is ample potential for linkage with research and capacity building activities in
other East-African countries.
5 Review SWOT of the Kenyan flower industry
A SWOT (strengths, weaknesses, opportunities, and threats) analysis is the general, qualitative
starting point for any competitiveness strategy. While the SWOT analysis is not a very precise tool, it
is a good way to provide a general characterisation of the current state of the industry, identify issues,
and generate discussion. It is particularly useful as a neutral facilitation tool to focus an initial
discussion on the perceived state of the value chain or to perform initial brainstorming on the potential
opportunities and risks. It is also a good way of identifying areas to examine in greater detail. (Webber
and Labaste, 2010)
In this chapter, we consolidate results from existing studies, policy documents and the preceding video
conferences. Issues are selected that have particular impact on the industry’s competitiveness. The
purpose of the SWOT is to fuel discussion and to be used as an initial input for a more detailed value
chain analysis as part of the subsequent CDE study.
We first set the stage by describing developments that are beyond the control of the Kenyan actors:
which external factors affect competiveness of the Kenyan industry? After that, we will take a closer
look at factors within the circle of influence, i.e. the strengths and weaknesses of the Kenyan sector.
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5.1
External factors
Opportunities
Threats
Market trends
 Growth particularly outside Western Europe.
 Increasing role of supermarket channel.
 Demand for bulk, but also specialty varieties.
 Market diversification, f.e. USA, Russia. (KFC 2010)
 Increasing direct trade.
 Interest in supply chain integration to reduce
intermediate costs and improve time-to-market.
 Shift of adding value from the wholesaler towards
the growers in developing countries (demand for
mixed bouquets remains strong).
Market trends
 Stagnating demand due to economic crisis.
 ‘Local for local’
 Computerisation and virtualisation of the supply
chain.
 Increasing scales and professionalisation.
 Pressure on margins.
Productive environment
 Technological developments, amongst others in sea
freight.
 Availability of research results abroad.
Competition
 Difficulties in other leading producer countries like
Ecuador and Israel.
Market access
 Increasing social and environmental concerns (CSR,
certification, carbon footprints, etc.).
 Increasing barriers to smallholder involvement.
(Jager 2010)
Productive environment
 Erratic weather patterns. (VC 1)
 Prevalence of pest and diseases emanating from
climate change. (VC 1)
 Volatility of transport costs and costs for fertilisers
and pesticides.
Competition
 Oversupply due to continuing growth of global
production.
 Competition from Latin American producers on
European market.
 Relocation of production to outside Kenya. (KFC
2010)
5.2
Internal factors
Only those factors are listed that currently distinguish Kenya from other leading producers. Kenyan
growers, for instance, enjoy reduced duties on imported inputs. However, this cannot be considered a
competitive strength as the level of incentives is similar to (or less than) other countries.
Strengths
Weaknesses
Production
 Varied climatic zones enabling product
differentiation.
 Year-round / off-season production. (CBI 2011,
Jager 2010)
 Economies of scale.
 Broad assortment, including summer flowers.
 Relatively experienced workforce. (including
managerial level)
 Dynamic smallholders (KFC website)
 Respect for breeders' rights (IPR): access to
varieties.
Production
 Failure to raise productivity profile. (KFC 2010)
 Vulnerability to weather events (climate control
capabilities).
 Vulnerability to agro-bacterium tumefaciens and
other soil borne diseases. (VC2)
 Insensitivity of some firms to the principles of CSR.
(MOA 2010)
 Inability by smallholder farmers to access highquality planting material due to high costs and
royalties of patented material. (MOA 2010)
Post-harvest and logistics
 Availability of airfreight: hub for the airline industry.
(KFC website)
Post-harvest and logistics
 Poor road conditions in some production areas.
 Inadequate facilities at the sea port for handling fresh
produce. (MOA 2010)
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Marketing
 Experienced in direct channel.
Marketing
 Negligible domestic market demand.
 Little promotion of the national brand.
 Difficulties accessing accurate data and market
information. (MOA 2010, CBI 2011)
 Dependency on exchange rates. (ProVerde 2011)
Supportive structure
Government
 Limited government interference. (Jager 2010)
 Liberalised economy with the removal of exchange
control and other constraints. (KFC website)
Supportive structure
Government
 Challenges associated with corruption, political
tension and insecurity. (Export.gov, Jager 2010)
 Inadequate Government policy coordination. (KFC
2010)
 Inadequate incentives for investment in value
addition and innovation. (MOA 2010)
 Weak inter-agency coordination leading to poor
delivery of regulatory services. (MOA 2010)
 Decentralised system of taxation often results in
double taxation and is time wise costly. (VC 4)
Sector organisation
 KFC actively participating in public policy
formulation.
 KFC recognised by market players.
Inputs suppliers
 Inputs are readily available.
Sector organisation
 Inadequate financial and non-financial resources for
KFC secretariat.
 Co-operation among Kenyan and East African
associations can be improved. (KFC 2010)
Knowledge
 Lack of an integrated and comprehensive data and
information management system. (MOA 2010)
 Lack of R&D activities, low level of innovation. (KFC
2010, CBI 2011)
 Inadequate financial, human and physical resources
for research and development on varieties. (MOA
2010)
 Inadequate coordination among research institutions.
(MOA 2010)
 Inadequate specialised institutions to offer
specialised horticultural extension services and
training. (MOA 2010)
Finance
 High inflation in Kenya.
 Inaccessibility to funds (partly due to high interest
rates), particularly for SME producers.
 Government financial support to the industry is
inadequate. (MOA 2010)
 Lack of appropriate insurance products tailored for
the industry. (MOA 2010)
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6 Projections and recommendations
6.1
Projections
We found that currency rates, oil prices, climate and the economic situation in the target markets for a
large part shape the development of the floriculture sector. These factors are basically determined by
forces far from the sector and even far from the producing country. Also, these factors are difficult to
predict. This makes it challenging to make statements about how the major producer countries will
fare in the coming years. Still, based on the trend of recent years and based on the current
competitive position, we can indicate the potential of the Kenyan industry and its main competitors.
In the past decade, production has further shifted toward the equator and African countries have
become more important. If this trend continues, then Kenya will possibly become the main producing
country in the near future. For now, this role, as measured by production, is still reserved to the
Netherlands, with Colombia in a close second position.
Kenya is already for a number of roses and summer flowers the most favourable production country.
The climate in Kenya is reasonably stable. In addition, soil and greenhouse structures are relatively
inexpensive. East African countries have by far the lowest labour costs. Wages in Ethiopia are still
much lower than in Kenya, but Kenyan employees have more experience in floriculture.
The rose assortment in Kenya rapidly shifts from small to large-flowered. Also in Ethiopia largeflowered roses dominate. This brings the assortment from African countries closer to the South
American products. Moreover, the distance to market from East Africa is less than from South
America. Transport costs way heavy for South American exporters. Certainly for the Ecuadorians who
have come to focus on Russia and Europe. Rising wages are an important threat to the flower industry
in Colombia and Ecuador. In Colombia, wages increase as a response to inflation and in Ecuador as
the result of government policy.
The Netherlands is still the major hub for the flower industry and that gives an advantage. Many
flowers from Kenya find their way through the Netherlands. Dutch farmers enjoy relatively low
transport costs. However, costs of labour, greenhouse structures, energy and land are much higher
than their foreign counterparts. As a result, the Netherlands' competitive position has deteriorated
significantly. These developments do not mean that production will disappear in the Netherlands.
Dutch growers seek exclusivity and quality combined with high production per m2.
So, Kenya and Ethiopia seem to have the best cards for the coming year. The expectation is that there
are no other countries able to challenge the big five flower exporting countries. Production in Israel
has been shrinking considerably and continuously during the past ten years. In Tanzania,
infrastructure is still a problem; the climate poses a limitation in Uganda; and the situation in
Zimbabwe has already been rather unstable for years. A possible candidate in the distant future is
China, but for now, infrastructure and the quality of the flowers let too much to be desired.
6.2
Key challenges and recommendations
Competitiveness is largely determined by the productivity with which a nation uses its resources. It is
not a static concept but dynamic especially in the context of pervasive globalisation. Competition is no
longer restricted to costs and price but increasingly plays out on multiple fronts: connectivity,
standards and certifications, quality and innovation, exploitation of cultural and geographic
endowments, etc. Because these new fronts are constantly changing and reshaping, a
competitiveness strategy should be dynamic and should simultaneously engage diverse institutions
and agents that are linked at various levels on various dimensions. (Worldbank 2009)
With market constraints becoming increasingly complicated while worldwide supply grows and
consumption stagnates, profit margins for flower producers are shrinking by the year. This is a real
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concern for such a significant industry in Kenya. Kenya must maintain its competitive edge in the
global flower sector over competitors both nearby and far away. The only way is to continuously
increase competitiveness. In order to do so, the following key challenges have been identified:
Guarding against external forces
Challenge:
The Kenyan flower industry is extremely vulnerable to the impact of external factors like currency
rates, oil prices, climate and the economic situation in the target markets.
Recommendations:
1. Diversify, both in product and in market. The Kenya flower industry should further diversify its
export assortment and develop export markets.
2. Stimulate the development of climate control capabilities.
3. Adoption of Good Agricultural Practices (GAP) plays a significant role in the effects of climate
change and increasing the competitiveness of an enterprise. (VC1)
4. Make available appropriate insurance products tailored for the industry.
SME involvement
Challenge:
Small and medium-sized (SME) producers – not only smallholders, but also producers with less
than about 8 hectares – will find it increasingly difficult to compete internationally. Growers will face
ever stricter requirements, which generally favour larger companies. Not all SMEs have access to
the resources needed to keep up with the professionalisation of the global flower industry. The
competition is scaling up and quality and efficiency is continuously improving.
Recommendations:
1. Make information accessible to SMEs.
2. Improve financing possibilities for SMEs.
3. Targeted research and training for SMEs. SME producers are always limited by capital in terms
of labour and technology and any capacity building in making them competitive would be vital.
4. Stimulate and facilitate cooperation among SMEs and between large firms and SMEs.
Focusing fiscal incentives
Challenge:
Experience from Ethiopia illustrates the potential impact of government support and coordination
on the development of a young industry. Also the Colombian and Dutch governments still play a
major role in facilitating advances in the sector. Each country faces specific challenges that ask for
targeted support. So is the case in Kenya. A specific issue for Kenya, for instance, is the
decentralised system of taxation that often results in double taxation and is time wise costly.
It is important that there is a sound incentive regime in place ensuring that resources flow to the
industrial sectors that have the best comparative advantage, and within those, to the firms that are
economically most efficient. The incentive regime should reward good performance such as high
productivity and large positive externalities, and punish bad performance.
Recommendations:
1. The incentive mix needs to be re-balanced and become specific. Tax breaks to support specific
activities like innovation, productivity and sustainability can have a more precise effect. Kenya is
able and should compete on other factors than costs alone. As mentioned in VC4: While
taxation imposed on utilisation of resources such as water will encourage effective utilisation of
resources, imposing tax on composting is likely to impact negatively adoption of Good
Agricultural Practices thus compromising the industry’s competitiveness.
2. It is imperative to consolidate taxation for ease of admissibility and compliance. (VC4)
3. Be aware of a “race to the bottom”. Coordinate tax policies among East African countries.
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Knowledge and innovation
Challenges:
Kenyan growers will have to innovate continuously in order to remain competitive. They will need to
respond to the permanent pressure on margins, professionalisation and changing supply chain
requirements. They face growers in competing countries who are supported by excellent
knowledge systems. According to Heemskerk (2008), most of the institutions, organisations and
policies required for a functional innovation system are present in Kenya, but there are gaps in the
system, because they are not optimally coordinated and do not operate in a systematic way. The
industry has not yet fully utilised existing research capacity in the local R&D system for diagnosing
problems providing solutions.
Recommendations:
1. Develop research capacity by improving financial, human and physical resources.
2. Improve coordination among knowledge institutions.
3. Open up international research sources and/or co-ordinate research activities in Kenya with
related and experienced institutes abroad. There is ample potential for linkage with research
and capacity building activities in other East-African countries.
4. Enhance collaboration between entrepreneurs and the local research system to more effectively
make use of available research capacity.
5. Create incentives for entrepreneurs to invest in research (innovative funding mechanisms).
6. Information technology investment for linking supply chain members and product traceability.
7. Improve specialised floricultural extension services and training.
National cooperation and branding
Challenges:
Competition from other supplying countries on Kenya’s main markets is increasing. Colombian and
Ecuadorian private sector bodies and export promotion organisations are more actively promoting
their national brands then African countries.
Social and environmental concerns are increasingly important in the market (CSR, certification,
carbon footprints, etc.). Compliance with standards becomes a licence to participate in specific
channels. Some Kenyan firms still demonstrate insensitivity to the principles of CSR, fuelling
adverse publicity and pressure from civil society groups.
Recommendations:
1. Stimulate sustainable entrepreneurship and compliance with relevant standards.
2. Promote the Kenyan national brand.
3. Co-operation among Kenyan and between East African associations can be improved.
Enabling business environment
Challenges:
Governments create the rules and frameworks in which businesses are able to compete against
each other. Experiences from around the world have shown that formulation of macroeconomic
policies alone may not be sufficient to trigger and sustain improvements in competitiveness.
Attention also should be given to how they are translated into the operations of firms and markets.
Firms that have to pay more than their competitors for energy, telecommunications, customs
services, transport and logistics, finance, specialised skills and business services, and overall
security will find it hard to compete in overseas markets. (Worldbank 2010)
Although under pressure, Nairobi continues to be the primary communication and financial hub in
East Africa. It has the region’s best transportation links. Still, road conditions in some production
areas are poor and facilities at the sea port are inadequate for handling fresh produce.
Kenya faces challenges associated with insecurity, corruption and political tension. The
government has been unable to provide a secure environment for businesses and families,
especially in urban settings. Property crime and violence are major concerns for investors and their
families. Security is another normally avoidable cost for companies.
Recommendations:
1. Improve security.
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2. Reduce excessive and complicated bureaucratic procedures.
3. Improve infrastructure road network and telecommunication, and expand sea and airport
facilities. (VC4)
4. Stimulate active participation of private sector in public policy formulation.
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References
Advice Commitee ‘Tuinbouwcluster Greenport.NL’ (2010). Vitaal tuinbouwcluster 2040. Ministry of EL&I of the
Netherlands
Altenburg, T. (2010). Industrial Policy in Ethiopia. Discussion Paper 2010/2. German Development Institute.
Brenthurst (2007). Colombia’s Floriculture Industry - A Story of Self-Discovery and Export Success. Brenthurst
Discussion Paper 8/2007. Brenthurst Foundation.
CBI (2009). EU Market Survey 2011: Cut Flowers and Foliage. Centre for Promotion of Imports from Developing
Countries (CBI).
Cooksey, B. (2011). The investment and business environment for export horticulture in northern Tanzania.
Background Paper no. 2. Overseas Development Institute (ODI)
GDS (2011). Towards a Globally Competitive Ethiopian Economy: The Role of Services and Urbanization. Case
Studies – Rose and Polo Shirt Value Chains. World Bank
Gebreeyesus, M. and Iizuka, M. (2009): Discovery of successful non-traditional exports in Ethiopia and Chile:
experimentation and coordination, first draft, paper presented at UNU-WIDER/UNU-MERIT/UNIDO
Conference “Pathways to Industrialization”, Maastricht, 22 Oct.
Heemskerk, W. (2008). Agricultural Innovation Systems Analysis (AISA): the Kenyan cut flower industry. KIT
Jaeger, P. (2010). Smallholders: How to Involve Small‐Scale Farmers in Commercial Horticulture. Paper for the
6th video seminar in the series “High Value Agriculture in Southern and Eastern Africa”
Kargbo A., Jing Mao and Cai-yun Wang (2010). The progress and issues in the Dutch, Chinese and Kenyan
floriculture industries. African Journal of Biotechnology Vol. 9(44), pp. 7401-7408, 1 November, 2010
KFC (2010). KFC Strategic Plan 2011-2013.
Mosioma, A. (2007). Tax Competition: The role of Tax incentives in encouraging harmful tax competition in the
East African Flower industry. Tax Justice Network for Africa.
Middelburg, A.F. (2011). De zes grote bloemenlanden. Article in Vakblad voor de Bloemisterij Ed. 40, 2011.
Middelburg, A.F. (2010). Sierteelt Ecuador in zwaar weer. Article in Vakblad voor de Bloemisterij Ed. 43, 2010.
Middelburg, A.F. (2009). Sierteelt is niet in ieder Afrikaans land booming. Article in Vakblad voor de Bloemisterij
Ed. 20, 2009.
Ministry of Agriculture of Kenya - MOA (2010). National Horticultural Policy.
Njoroge, S., Okech, T. (2011). An Assessment of the Factors Influencing Foreign Direct Investment Inflows in
Kenya’s Horticultural Industry. International Journal of Business and Social Science. Vol. 2 No. 5; March
2011
Ngeleza, G.K., Muhammad, A. (2009). European Union Preferential Trade Agreements with Developing Countries
and Their Impact on Colombian and Kenyan Carnation Exports to the United Kingdom. IFPRI Discussion
Paper 00862
Ploeg, R. van der (2009). World Flower Market. Article in HortiHolland Magazine. March 2009
Policar, E. (2010). Israeli horticulture back on track. Article in Floraculture International. Ed. November 2010
ProEcuador (2011). Incentivos del Codigo de la Producción.
ProVerde (2007). Business Plan Floricultural Research & Development Fund. Kenya Flower Council.
ProVerde (2010). The European Market for Fair and Sustainable Flowers and Plants. Belgian development
agency BTC & Trade for Development Centre.
Veen, H.B. van der, H.A.B. van der Meulen, K.H.M. van Bommel and B. Doorneweert (2007). Exploring
agricultural taxation in Europe. LEI
Webber, M.C., Labaste, P. (2010). Building Competitiveness in Africa’s Agriculture - A Guide to Value Chain
Concepts and Applications. IDB and World Bank.
Worldbank (2009). Clusters for Competitiveness. A Practical Guide & Policy Implications for Developing Cluster
Initiatives. International Trade Department.
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Appendix 1 Dutch agricultural knowledge system
In this appendix, we provide background information on the Dutch agricultural knowledge system as
requested by participants in the fifth videoconference requested.
Text is an excerpt from: ProVerde (2007). Business Plan Floricultural Research and Development
Fund in Kenya.
Dutch floricultural research: from OVO towards PPP
The development of the Dutch agricultural system has been strongly supported by the agricultural
knowledge system. This system was put into place in the second half of the 20th century and
consisted of a close interaction between the agricultural education system, the agricultural research
system and the agricultural extension system3.
The OVO-triptych
As a starting point of this agricultural knowledge system often the so-called OVO-triptych is
mentioned. The OVO-triptych reflects the close interrelations between Education, Research and
Extension (in Dutch: Onderwijs, Voorlichting, Onderzoek). The exchange of information and transfer
of knowledge, based on a strong infrastructure for scientific research and education, has led to a
tremendous improvement of the Dutch knowledge basis and to a corresponding high level of
innovation.
The Ministry of Agriculture was responsible for the entire agricultural education system in The
Netherlands. The OVO-triptych in fact reflected the need for strong links between education and the
agribusiness. Professional education and training were given by Agricultural Education Centres,
which provided programmes from lower to higher education, for students between the ages of 12 and
20. The Agricultural College (later Agricultural University) in Wageningen was devoted to education
in agriculture-related sciences at an academic level. It was founded in the 19th century, first as a State
Agricultural School, with the intention of improving agriculture on the basis of increased knowledge via
research and education.
In addition to academic research, more strategic and applied research was carried out at various
institutes within the Agricultural Research Organisation (DLO), also under responsibility of the
Dutch Ministry of Agriculture. Since then, ‘Wageningen’ has developed into an internationally
recognised centre of knowledge and expertise in agriculture4.
From knowledge-driven toward demand-driven research
The organisation of agricultural research, however, has changed over the past twenty-five years. One
of the main drivers for change was the required transformation from knowledge-driven toward
demand-driven research. The development of research, innovation and practical application was no
longer the main responsibility of the government, but became much more dependent on the needs
(and inputs) of the industry. Another driver for change was the increased globalisation of research, the
required investments in technologies and the more multidisciplinary arrangement of research. To
remain competitive on a global scale, it became important to improve the efficiency and the efficacy of
the agricultural knowledge system in the Netherlands.
In education, the transition is from the OVO triptych towards a so-called OOO network, Education,
Research, Entrepreneurship (in Dutch: Onderwijs, Onderzoek, Ondernemerschap), in which academic
research, education and industries all work together in a network system, to establish effective
education programs.
3
4
Kamphuis 2005
Dons & Bino 2006
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In research, a transition can be recognised from a linear flow of information, from fundamental
research via applied research towards implementation, in practice to a so-called Public–Private
Partnership (PPP). In these public-private partnerships various stakeholders work closely together in
a more dynamic and open system. New, innovative collaborations between universities and private
companies are considered important to drive the value creation of knowledge5.
Wageningen University and Research Centre (Wageningen UR)
This all has led to a major reorganisation of agricultural research in the Netherlands, which took place
incrementally between 1987 and 2004, and culminated in the creation of Wageningen University and
Research Centre (Wageningen UR).
Wageningen UR is a collaboration between:
1. Wageningen University;
2. Van Hall Larenstein School of Higher Professional Education; and
3. DLO foundation, i.e. the specialised research institutes from the Dutch Ministry of Agriculture.
Wageningen University and Van Hall Larenstein together offer a selection of bachelor’s and master’s
degree programmes. Van Hall Larenstein focuses on integrated regional development, animal
management, and nutrition and health. Van Hall Larenstein offers 14 bachelor’s degree programmes
and 6 professional master’s degree programmes to a total of 4,400 students of 20 nationalities.
Nowadays, the complex array of the sector’s research organisations has been transformed into a
single large complex organisation covering most agricultural research and education.
How knowledge and research is organised in the Netherlands
Horticultural research takes place on three levels: pure, strategic and applied. Knowledge obtained
from research is disseminated via study clubs and via relevant educational institutions. In addition,
there are private consultancy firms who carry out commissioned research. Their findings are available
primarily to their clients.
Fundamental research
Fundamental research is chiefly the work of university researchers and is focused on answering
questions arising from scientific practice itself. This research is driven by pure curiosity and does
not always aim at practical applications. Fundamental horticultural research is carried out at the
University of Wageningen (part of Wageningen UR). The departments most concerned with
horticulture are the Plant Sciences Department and Agrotechnology and Food Sciences
Department. It should be noted that other departments are concerned with research into economic,
business and marketing aspects which play a role in horticulture.
Strategic research
Strategic or application oriented research is the focus of research institutes, which aim to develop
expertise that can be applied within two to three years. The research institutes at Wageningen UR
work on practically oriented research, aiming to develop expertise that can be applied within two to
three years. Research might relate to new sustainable production systems, improvements to chains or
responding to climate changes. There are also a range of short-term research assignments,
conducted at the request of government, business, or public-private funds. Strategic research on
horticulture is conducted by:
 Plant Research International; and
 Agrotechnology & Food Sciences Group (AFSG).
Applied research
5
Dons & Bino 2006
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Applied research focuses on the use of knowledge to answer concrete practical questions. Applied
research takes place throughout Wageningen UR, but especially in the regional centres for Action
Research.
Knowledge and insights arising from practice in field farming, animal welfare, housing and
environmental issues form the basis for new management systems. New varieties and breeds are also
tested, often in collaboration with future users. Funding for action research mainly comes from the
business world and from branch organisations.
From 2001, applied plant research in the Netherlands is brought together under the Practical Plant
Research Organisation (PPO). The glasshouse horticulture strand of this organisation works for the
cut flower, pot plant and glasshouse vegetable sector. The PPO has research establishments in
Aalsmeer, Naaldwijk, Horst and Klazienaveen, where work is carried out in modern, well-equipped
glasshouse complexes. In addition, the PPO has laboratories, cold stores and climatic test chambers,
different areas of expertise to support research and facilities for light measurement, substrate and
nutrient research. The PPO’s clients are the Ministry of Agriculture, Nature Management and Fisheries
and the Product Board for Horticulture, which represents the private sector. Individual companies and
organisations can also commission paid research.
Most Dutch cut flower and pot plant growers are affiliated, through the regional organisations, to the
Plant Production Information Service (LTO Groeiservice), a member organisation of the Dutch
Federation of Agricultural and Horticultural Organisations (LTO Nederland). This service organises
information evenings, excursions, courses and workshops on all aspects of the business. These cover
cultivation subjects such as variety selection, climate control and integrated plant protection, but also
business subjects like cash flow, personnel and information management and market-oriented
production. The growers not only receive information from experts, but also exchange their own
knowledge and experience. Many growers find this exchange of information a valuable source of
technical knowledge.
The Plant Production Information Service also supports groups of growers. Often these growers work
together on a project basis, for example on the development of technology, applied research or
product promotion. In such cases, the Plant Production Information Service can, for example, write the
project proposal, apply for a subsidy and provide the management or organisational support of the
project. The Plant Production Information Service maintains contacts with a network of growers
through excursion groups, regional working groups and national committees. It has thus amassed a
vast amount of practical knowledge. On this basis the Plant Production Information Service represents
the growers in negotiations and consultations with researchers, information services, suppliers and
buyers.
Product Board for Horticulture
The Product Board for Horticulture (Productschap Tuinbouw, or PT, in Dutch) is a statutory industrial
organisation (PBO in Dutch). This means that the regulations (statutes) formulated by the Product
Board for Horticulture apply to all companies in the sector. The Product Board for Horticulture
promotes the collective interests of all businesses within the sector: growers, auctions, traders,
horticulturists, breeders, propagators, producers, retailers and their employees. It aims to facilitate as
much as possible all the work in this chain, from producer to consumer.
The Product Board carries out different activities in areas like promotion, market research, information
dissemination, formulating standards, and chain projects. The Product Board for Horticulture
implements many Brussels regulations via the Joint Administration Department in close consultation
with the Ministry of Agriculture, Conservation and Fisheries.
The Flower Council of Holland is the marketing and sales promotion organisation of the cut flower
and houseplant industry of the Netherlands. As it is part of the Product Board, it is also financed by the
mandatory levy to which all sectors of the trade contribute.
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Every year, the Product Board for Horticulture spends millions of euros on scientific research. This
helps to maintain the top position that Dutch horticulture occupies in technology. The research
institutes improve crops or develop growing methods that spare the environment. The Product Board
itself monitors this work, to ensure that this is carried out efficiently.
Note that the role of the Product Board and Flower Council are currently under discussion.
Private research
In addition to the Plant Production Information Service, which is aimed primarily at sector-wide
exchange of knowledge, there are private consultancy firms that often work exclusively for a single
client. As a result of increasing professionalisation and competition in floriculture, growers, growers’
associations and traders are turning to these consultancy firms more and more often directly. Their
operations are not confined to the Netherlands: they also provide advisory services to foreign
companies.
In The Netherlands, there is a clear trend that growers increasingly scale up and form growers’
associations. More and more, these growers’ associations want to be informed about relevant market
developments. Sometimes they use external private companies to conduct specific research. In some
cases, these grower groups hire representatives who act on behalf of the group of companies in the
market place. Mostly, however, these representatives are merely sales representatives who also
function as market researchers.
As mentioned before, we notice an internationalisation or even globalisation of the 'research market'.
In particular, larger multinational companies and growers’ associations 'shop' around the world among
the different centres of excellence. Consequently, partly due to the withdrawal of government,
government budgets tend to go to fundamental and strategic research, while industrial budgets fund
applied research.
The Practical Training Centre (PTC+) in Ede provides supplementary and specialist education for
the horticulture branch and for heating and cooling system installers. This organisation provides
courses and training programmes not only in the Netherlands but all over the world. Foreign students
often come to the Horticulture Department. Courses are also run ‘on location’ in the student’s working
environment. A very important aim of the courses is to enable the participants to reap immediate
benefits from directly applicable knowledge. The Horticulture Department runs innovative projects in
which the latest technological developments are translated into education. PTC+ runs a number of
international projects and provides guidance and supervision for others.
Capacity Development and Institutional Change Programme (CD&IC), part of Wageningen
International, offers partners and clients a comprehensive range of capacity development services.
The Programme is part of Wageningen UR’s focus on ‘science for impact’ – actively linking research
with societal change processes. CD&IC works to improve food systems, agricultural marketing and
trade, natural resources management and the livelihoods of rural people. The Programme is active in
countries with transitional and developing economies and on global issues.
In 2006 the portfolio of work previously undertaken by the International Agriculture Centre (IAC)
was merged into the CD&IC Programme enabling greater collaboration within Wageningen UR on
capacity development. IAC’s main duties were to hold international courses for professionals, mainly
from developing countries, to contribute to courses abroad, to advise on programmes and projects for
the benefit of developing countries, to mediate in individual study programmes for researchers and to
mediate in the deployment of experienced (agricultural) experts to work on projects in developing
countries.
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